Weak demand seen for Q1
The first quarter of 2024, however, is expected to experience ongoing sluggishness from the lackluster recycled polymers demand this year, exacerbated by the seasonal dip in buying appetite during winter.
Meanwhile, expectations of ongoing macroeconomic headwinds and growing focus on cashflow from consumers have led to pessimism that consumption will improve towards the first half of 2024, with conditions in derivatives curbing consistent liquidity in the sector.
The cost-competitiveness of virgin material will likely remain an underpinning trend in H1 2024 for recycled polymers, with consumption largely directed towards more economical items.
"Next year will change a lot with sustainability goals, 2025 is coming, many big brands have announced goals and are looking to increase their content", a converter said, before adding that "it all depends on the customers – they need to wake up and use more recycled material, otherwise the struggle will continue".
Recycled polystyrene demand, specifically, will be based on the interest rate scenario and a drop in rates could prop up construction or housing-related buying appetite.
Southeast Asia's easing cost-competitiveness
In Southeast Asia, recyclers were concerned about higher manpower costs, with the effect of regional plant startups and expansions in H2 2023 likely to have an impact on supplies in the first half of 2024.
Labor costs in collection hubs such as Indonesia, Thailand and Vietnam are also expected to rise on strong calls to increase the local minimum wage.
While the long-term demand picture is positive, cost-pressures may result in Southeast Asian resin losing competitiveness relative to suppliers in other markets such as India.
In India, market players expect improved demand as domestic recycled polyethylene buyers are likely to start using a share of recycled material in their end-product ahead of the implementation of the government guidelines for 2025.
The country's Ministry of Environment, Forest and Climate Change has set recycling rate targets of 30%-50% for various plastic packaging by 2025, along with recycled plastic content requirements of 5%-30%.
However, sources in India found the recycling rates as ambitious, as the process would require huge capacity additions and similar increase in collection rates. Some domestic buyers have already started using a percentage of recycled polyethylene to secure future supplies.
Food grade pellets attract US contracts
Pellet prices will continue to see volatility in 2024, sources said, with non-food application converters expected to keep switching between recycled and virgin-based products on cost considerations, though prices of food grade pellets will likely see more stability due to an increased proportion of contract volumes.
In 2024, buyers will have to choose whether to stock up early when prices are low and demand uncertain, or wait for demand clarity amid risks of higher pricing and limited supplies.
There were mixed views on upcoming contractual commitment levels for 2024.
In H2 2023, sellers saw increased interest in contracts, as buyers looked to secure supplies and ensure more consistent price levels.
"Stability is what everyone wants to see, versus the peaks and valleys from the past two years," said a broker.
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